Apple continues to invest a considerable amount of money into research and development for future products, as costs ballooned to $1.42 billion in the just-concluded March quarter, with signs from the company that those expenses may continue to grow even further.

The $1.42 billion Apple spent on research and development in its second fiscal quarter of 2014 represented a $303 million increase from the same period a year ago. As a percentage of net sales, it was 3.1 percent in 2014, up from 2.6 percent of sales in March of 2013.Apple spent more on R&D in the first six months of fiscal 2014 than it did in the five full years prior to the launch of the iPhone.
R&D costs are also up about $90 million sequentially. To date, Apple has spent some $2.75 billion on R&D in fiscal 2014, up from $2.13 billion in the same six-month span of 2013.

To further put the numbers in perspective, Apple spent $2.68 billion on its entire R&D budget in the five years before the first iPhone was released. The company exceeded that amount in just the first six months of fiscal 2014.

In its 10-Q filing with the U.S. Securities and Exchange Commission, Apple said the increased spending was "driven primarily by an increase in headcount and related expenses to support expanded R&D activities." The investments are said to be "directly related to timely development of new and enhanced products."

Apple's executive team also touched on R&D costs during the company's quarterly earnings conference call, when Corporate Comptroller Luca Maestri said Apple expects operating expenses to be between $4.4 billion and $4.5 billion in the current June quarter. For comparison, total operating expenses in the March quarter, including R&D, were $4.35 billion.

"We are continuing to invest heavily in R&D for current revenue generating categories as well as future products and services," Maestri said on Wednesday.

Apple Chief Executive Tim Cook also cited escalating R&D investments as a key reason why his company needs to have ample cash on hand. Apple ended the quarter with a whopping $150.6 billion in cash plus marketable securities, 88 percent of it held overseas.

"We'll continue to innovate by investing in research and development and capitalizing on our strengths in hardware, software and services," Cook said.

If Apple's R&D spending continues to grow at the same rate, it would increase by about $100 million sequentially in the June quarter, topping $1.5 billion.

R&D doesn't just develop products, it develops people. Woz and to some degree, Jobs, got their start in part with the aid of a once great R&D institution, Hewlett Packard. Can't imagine the boost to the human capital that R&D spending by companies like Apple has provided. Go Apple, (and Tesla, SpaceX and the others... well, some of the others lol).

Originally Posted by IQatEdoGo Apple, (and Tesla, SpaceX and the others... well, some of the others lol).

I love R&D and the idea of pushing technology forward. But Tesla and SpaceX are telling examples because Elon Musk was able to develop them with only tens of millions, and he got an electric car that's actually better than gas cars, and rockets cheaper than anything any government ever built. Whereas Apple is investing billions for incremental improvements year after year.

Sometimes I think the world would be better off if not so many people focussed on IT and instead things were a bit more balanced between IT and other tech industries.

The irony is this: "Apple spent $2.68 billion on its entire R&D budget in the five years before the first iPhone was released." Yet, Samsung spent almost twice that amount on advertising their smartphone rip-offs in 2012 alone. One has to wonder what Samsung might have been able to invent/innovate had they shifted half their ad budget over to R&D. Some true innovation? Or just more innovative rip-offs?

Or, Sammy could have gone the Facebook route, and just bought some innovation.

I love R&D and the idea of pushing technology forward. But Tesla and SpaceX are telling examples because Elon Musk was able to develop them with only tens of millions, and he got an electric car that's actually better than gas cars, and rockets cheaper than anything any government ever built. Whereas Apple is investing billions for incremental improvements year after year.

Sometimes I think the world would be better off if not so many people focussed on IT and instead things were a bit more balanced between IT and other tech industries.

Interesting that you mention IT specifically. I feel that Apple has moved forward with faltering steps, except in respect of overt hardware design, which continually and successfully pushes the envelope. However, comparing Elon Musk's companies with Apple is perhaps mainly illuminating of the differences between them that result from circumstance rather than design. Apple is a long established business in very competitive markets that has everything to lose, whereas SpaceX and Tesla are hungry startups that are parameterising anew their respective industries and have everything to gain. This lesson hasn't been lost on Apple, which has participated in the startup game by it seems, going on a bit of a spending spree buying startups.

This is certainly exciting, but I still say Apple needs to put more effort into improving Maps. The once a year updates aren't suited well to mapping IMO. It's not good enough when you report the same issue three times over a yearly period and receive no reply or no fixes. Heck, forget the notification reply, just fix the damn thing. They should have a couple of people driving around this country checking out the more serious issues being reported. I'd say they have a big backlog of reports here, and I also think the need to redo the UI and options for reports, because currently it sucks.

This is certainly exciting, but I still say Apple needs to put more effort into improving Maps. The once a year updates aren't suited well to mapping IMO. It's not good enough when you report the same issue three times over a yearly period and receive no reply or no fixes. Heck, forget the notification reply, just fix the damn thing. They should have a couple of people driving around this country checking out the more serious issues being reported. I'd say they have a big backlog of reports here, and I also think the need to redo the UI and options for reports, because currently it sucks.

Apple has improved the map app on a more regular basis. It, however, hasn't fundamentally changed it. It has made a lot of map related purchases. I suspect it takes time to take all of that technology it has purchased to incorporate it into its mapping product.

My biggest grievance with the map app is not with its ability to give directions, it does that extremely well. Instead, its reliance on sources like Yelp for point of data information is holding Apple's efforts back. I suspect the reason you wait so long for some corrections to be made, is third party companies like Yelp are in charge of making the changes. I am hoping that Apple addresses that need in a significant update.

I love R&D and the idea of pushing technology forward. But Tesla and SpaceX are telling examples because Elon Musk was able to develop them with only tens of millions, and he got an electric car that's actually better than gas cars, and rockets cheaper than anything any government ever built. Whereas Apple is investing billions for incremental improvements year after year.

Sometimes I think the world would be better off if not so many people focussed on IT and instead things were a bit more balanced between IT and other tech industries.

For good or ill, Apple's investment of billions of dollars in software and hardware has returned much, much more to it's investors than Tesla's "tens of millions" (which I expect is understated). Part of the lesson is that it's expensive to develop products that are worth a lot more to consumers than the cost of manufacturing. Tesla may figure out how to do that someday, but they haven't yet.

The irony is this: "Apple spent $2.68 billion on its entire R&D budget in the five years before the first iPhone was released." Yet, Samsung spent almost twice that amount on advertising their smartphone rip-offs in 2012 alone. One has to wonder what Samsung might have been able to invent/innovate had they shifted half their ad budget over to R&D. Some true innovation? Or just more innovative rip-offs?

Or, Sammy could have gone the Facebook route, and just bought some innovation.

The funny thing is that Samsung actually has a higher R&D budget per year than Apple. In 2013 it spend 10.4 billion in R&D, second highest in the world. This of course is not only the mobile department. But for example Google's spending on R&D was also higher than Apple's in 2013, Google had a R&D budget of 6.8 billion. Microsoft does even better than Google with 9.8 billion. Apple didn't rank in the top 20.

So weirdly Apple's R&D budget is small when compared with other competitors.

Whatever they spend is worthless unless there are profit generating products to show for the investment. Apple from 1985-1996 spent a great deal on R&D but ended up with little to show for it. The remarkable thing when Jobs came back was how much he curtailed R&D efforts that were cool but not producing products.

The funny thing is that Samsung actually has a higher R&D budget per year than Apple. In 2013 it spend 10.4 billion in R&D, second highest in the world. This of course is not only the mobile department. But for example Google's spending on R&D was also higher than Apple's in 2013, Google had a R&D budget of 6.8 billion. Microsoft does even better than Google with 9.8 billion. Apple didn't rank in the top 20.

So weirdly Apple's R&D budget is small when compared with other competitors.

Well my post makes clear that Samsung's R&D spending indeed is not only their mobile division. But I just thought that the disparity in R&D spending between Apple and Microsoft and Apple and Google was rather striking and weird. The numbers of course don't explain what exactly the money is spend on but just thought it was an interesting observation.

I don't buy this, Maps always gets me to where I want to go and frankly I don't need much more than that.

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Originally Posted by Ireland

This is certainly exciting, but I still say Apple needs to put more effort into improving Maps. The once a year updates aren't suited well to mapping IMO.

Maps is continually updated. By that I mean the data on the servers is kept fresh, it will intelligently route you around construction for example.

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It's not good enough when you report the same issue three times over a yearly period and receive no reply or no fixes. Heck, forget the notification reply, just fix the damn thing. They should have a couple of people driving around this country checking out the more serious issues being reported. I'd say they have a big backlog of reports here, and I also think the need to redo the UI and options for reports, because currently it sucks.

Detail those problems here and then mail Tim Cook a link. I'm not sure what your problems are but I've had few if any issues with routing.

Samsung is a huge company. Don't forget they are setting up to transition to 14 nm which has been a massive money sink for all manufactures. What counts is the costs for products that compete with Apple.

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Originally Posted by Chipsy

The funny thing is that Samsung actually has a higher R&D budget per year than Apple. In 2013 it spend 10.4 billion in R&D, second highest in the world. This of course is not only the mobile department. But for example Google's spending on R&D was also higher than Apple's in 2013, Google had a R&D budget of 6.8 billion. Microsoft does even better than Google with 9.8 billion. Apple didn't rank in the top 20.
So weirdly Apple's R&D budget is small when compared with other competitors.

Samsung is a huge company. Don't forget they are setting up to transition to 14 nm which has been a massive money sink for all manufactures. What counts is the costs for products that compete with Apple.

I'm well aware of that. The Samsung mention was actually meant more as a funny anecdote (i hope I'm using that word right :)). As in Samsung spends more but...

The disparity in R&D between Apple and Microsoft/Google is what was actually more important in the post. It's a rather striking/weird difference.

They have $150 billion - that's 150 reasons to feel confident in an age where empires rise and fall in a few years. This gives Apple the confidence to take risks without worrying about going under. I believe that beginning in June, apple will enter another golden age. Literally and figuratively. Tim cook has learned a few lessons as CEO, and I like his attitude. He's running Apple the way Apple should be run. You can't run Apple like any other tech company. He gets their culture. Can't wait to see what's coming up next.

Elon took advantage of decades of government funded aerospace vehicle research at 10's of billions of dollar, and not just by the U.S. government at that. I don't think that subtracts from what Space X has accomplished under his leadership.

I'll give him more credit for Tesla, as Elon actually had to build an electric vehicle and a market, and he has done that.

The R&D budget may be tiny for a company this size, but it has apparently been tightly focused since Steve Jobs returned.
With this much money in the bank, I kinda wish Apple would re-establish a skunkworks R&D dept. to think different and do basic research in related areas.
Personally, I'd like to see some major efforts in the physics of light and lenses. Is there a radical new technology that would allow them to create tiny zoom lenses, for instance?

The R&D budget may be tiny for a company this size, but it has apparently been tightly focused since Steve Jobs returned.
With this much money in the bank, I kinda wish Apple would re-establish a skunkworks R&D dept. to think different and do basic research in related areas.
Personally, I'd like to see some major efforts in the physics of light and lenses. Is there a radical new technology that would allow them to create tiny zoom lenses, for instance?

What do you mean re-establish? Seriously asking.

Another point of view, although I agree with your basic point: The R&D in basic physics, say like optics, nanomaterials or quantum phenomena might always have to pass a "product-use" test, as far as Apple is concerned. Open-ended research like Bell Labs or IBM used to do, might be seen as de-focusing for Apple.

Bell Labs, captive as they were to a monopoly that famously were not so focused on the end user, but more on defending their AT&T network, were unable to exploit their inventions like the transistor or the microwave laser because the tremendous overhead in bureaucracy—network thinking—which is like empire thinking in geopolitics. It wasn't telephony that benefited from the transistor first, but computers and Japanese consumer electronics.

I suspect that Apple likes to merge with (acquire) those doing the basic research. Apple's version of basic research is in conceiving and identifying new products, and developing technologies to produce them with their "manufacturing partners." And you have to add, "to enhance people's lives."

Apple keeps the iteration and failures secret until something is developed enough to reveal. We have no idea what they have been working on, save for rumors and baseless speculation.

I am not seeing anything like self driving cars, street level views of every road on Earth, high altitude balloon wireless internet covering the entire planet, human sized autonomous robots, contact lens cameras or singularity class AI projects out of Apple. I know that makes me sound like a Google fan but I am really an Apple fan and wish they would take on some really big projects.

Apple has been starting up whole new categories of devices. They are a startup company, or at least for the last 15 years the company. The company was built on new devices and connections between software and hardware. Apple's real weak spot was exposed when they had the falling out with Google. Apple just does not seem to have anyone at the highest levels of management that understands the Cloud on a technical level.

Apple's real claim to fame has been how they have used a very target like R&D to drive the tech that they need for what they are building. The efficiency of Apple's R&D is unmatched in by any other company. The hope is that this new broader R&D effort can be used to make products that still are fully developed and break new ground. Sometimes it seems everybody is looking over everyone else's in shoulder in Silicon Valley and they are all looking for someone with the same expertise. Apple's secrecy has helped a lot in this area. I am not concerned about information about products 4 months from introduction. There is no way to keep secrecy and ramp up to sell 15 million products a month at the same time. Secrecy is about keeping new categories under wraps until they are ready for the light of day.

I am not seeing anything like self driving cars, street level views of every road on Earth, high altitude balloon wireless internet covering the entire planet, human sized autonomous robots, contact lens cameras or singularity class AI projects out of Apple. I know that makes me sound like a Google fan but I am really an Apple fan and wish they would take on some really big projects.

You won't see that out of Google (except Street View since that's here already) within the foreseeable future, and when you do, Apple may be the one making it accessible.

I think Siri is definitely one of the biggest R&D costs (if it counts as R&D) It's a huuuge, dare I say messy, never ending project. And if they aim to cover more and more languages.. holy crap... And all I'm doing with Siri is to tell her occasionally to set the timer to 8 minutes now and then...

The message from interviews with the big guys like Jony and Schiller etc. that I feel they wanna send out is that "We're just getting started", implying that they have got sooo muuuch new stuff coming. They probably got their heads 20 years into the future. I hope there's room for some fun stuff :)

I'm well aware of that. The Samsung mention was actually meant more as a funny anecdote (i hope I'm using that word right ). As in Samsung spends more but...
The disparity in R&D between Apple and Microsoft/Google is what was actually more important in the post. It's a rather striking/weird difference.
I just thought it was an interesting observation.

Well I would worry about Google, MicroSoft unfortunately needs a management team that can demonstrate that they have a clue. I realize that there is a new team in place at MicroSoft but they haven't demonstrated an ability to put all that R&D money to good use. Google I'd worry about!

The R&D budget may be tiny for a company this size, but it has apparently been tightly focused since Steve Jobs returned.
With this much money in the bank, I kinda wish Apple would re-establish a skunkworks R&D dept. to think different and do basic research in related areas.

Would we even know if Apple had a SkunkWorks?

By the way I have full confidence that Apple is involved in long term research. Of course Wall Street doesn't understand the importance of that but frankly screw them.

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Personally, I'd like to see some major efforts in the physics of light and lenses. Is there a radical new technology that would allow them to create tiny zoom lenses, for instance?

Camera, sensor and mechanism research is non stop in the optics world. I'm not sure if it is worthwhile for Apple to explore this area due to the rather broad research already happening. In Apples case the only way to do better camera wise is to overcome their thin is in problem. Good optics can only be made so small for a given sensor size. To do better they would need to overcome some fundamental physics issues. They have possibly one stop before hitting the wall and that is Quantum Dots, after that I don't see much on the horizon for marketable better sensors.

I think Siri is definitely one of the biggest R&D costs (if it counts as R&D) It's a huuuge, dare I say messy, never ending project.

Actually I don't think it is that huge. After all they bought the company responsible for Siri (my understanding) so I don't see the cost of Siri as a huge problem.

However it isn't Siri precisely that they need to research but rather Artificial Intelligence as AI is the future of operating system technology.

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And if they aim to cover more and more languages.. holy crap... And all I'm doing with Siri is to tell her occasionally to set the timer to 8 minutes now and then...

I use Siri very little, it needs a lot of work no doubt but you can't expect C3PO the first thing out the door. By the way Siri sitting on Apple servers is not a long term solution for AI, AI needs to move to the users device.

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The message from interviews with the big guys like Jony and Schiller etc. that I feel they wanna send out is that "We're just getting started", implying that they have got sooo muuuch new stuff coming. They probably got their heads 20 years into the future. I hope there's room for some fun stuff

This certainly should be the case as Apple is finally in a position where they can finance all this stuff. iPhone was developed only a short time ago and frankly by a significantly different and smaller company. Now they can finance a whole host of technologies.

I love R&D and the idea of pushing technology forward. But Tesla and SpaceX are telling examples because Elon Musk was able to develop them with only tens of millions, and he got an electric car that's actually better than gas cars, and rockets cheaper than anything any government ever built. Whereas Apple is investing billions for incremental improvements year after year.

Sometimes I think the world would be better off if not so many people focussed on IT and instead things were a bit more balanced between IT and other tech industries.

A: The government never built any of those rockets—contractors did.

2: SpaceX ix able to build them cheaper because they're doing nothing but reinvent the wheel. They're duplicating work that was done 50-55 years ago.

I wish to hell SpaceX (or someone) would try to do something that would actually bring down launch costs—like Chrysler's SERV from 45 years ago.

With Apple being as secretive a company it is, a lot of assumptions are being made as to where their R&D budget is going. Unless you work in specific departments within Apple doing R&D, then no one actually knows. Even within Apple, a lot of R&D projects are compartmentalized.

With regards to Microsoft & Google, a lot of their R&D might be public but I haven't seen large product advances being made. Self driving cars and Glass are all cool but until successful products come of them, then it is all just cool stuff we see.

...2: SpaceX ix able to build them cheaper because they're doing nothing but reinvent the wheel. They're duplicating work that was done 50-55 years ago.

I wish to hell SpaceX (or someone) would try to do something that would actually bring down launch costs...

Don't understand your post, sorry. Is SpaceX reinventing or duplicating? Well, the aren't reinventing because of course, Elon Musk is fully aware of precedents. Neither are they copying because there is novelty to SpaceX's designs that take advantage of modern knowledge, computing power, materials and engineering practices. The entire business model of SpaceX is built on vastly lower costs to orbit. According to Musk, they can now do it more cheaply than the Chinese. Actual lower costs will mainly be achieved under the SpaceX business model once hardware is being re-used. They are now so close to achieving this.